Amid a buzz of publicity, yesterday was the day that many Beatles fans had eagerly waited for, with the release of a new video game in the band’s name – “The Beatles: Rock Band.”

If you’re not familiar with the “Rock Band” concept, it’s a bit like karaoke, except you play music in addition to singing. Gamers follow along with their favorite musicians/songs, using an electronic drum kit and guitar, and sing the songs, too.

The game is enormously popular, having generated over $1 billion in revenue. And gamers can download individual songs, albums, or catalogs of groups like AC/DC, The Who and The Grateful Dead. So far, they’ve paid for and downloaded over 40 million songs…

Both Paul McCartney and Ringo Starr were part of the creative process and have endorsed the game in the ensuing media hype that developed.

But what about you and me? Well, while we might never be as wealthy as the “Fab 4,” perhaps we can profit from a new wave of Beatle Mania.

These “Fab Four” Stocks Are Set for a “Beatle Boost”

Let’s take a look at four companies that could make big bucks off the The Beatle’s Rock Band release…

• Viacom (NYSE: VIA.B): This firm should be the biggest beneficiary of the game’s success. Its MTV unit owns Harmonix Music Systems, the creator of “Guitar Hero” and several “Rock Band” titles, including “The Beatles.”

Viacom also owns cable TV staples such as Comedy Central, VH1, Nickelodeon and CMT. In addition, it produces and distributes movies through its Paramount Pictures division.

However, Wall Street likes Viacom about as much as conservatives liked Paul, John, George and Ringo’s mop-top haircuts in the 1960s. Analysts currently have eight “Buy” recommendations on the stock, 17 “Holds” and eight “Sell” ratings.

Keep in mind that most analysts rate stocks as “Buy.” A “Hold” essentially means sell, while an outright “Sell” rating means “this stock is so bad, even we don’t want the firm’s investment banking business.”

And note that Wall Street analysts have a horrendous track record when it comes to rating stocks.

So given my contrarian nature, I like stocks that have lots of “Hold” and “Sell” ratings, since analysts are often behind the curve and afraid to go against the grain. When a company turns around, they’re then forced to upgrade the stock and that often leads to gains in the share price.

And as for Viacom, the future doesn’t look as bad as they portray it. The company is expected to earn $2.05 per share in 2009, followed by a nearly 10% increase to $2.25 next year. In 2011, Wall Street projects earnings of $2.61.

The stock trades at just 12 times this year’s expected earnings, 11 times next year’s and just 1.1 times its trailing 12-month sales.

Viacom shares seem cheap. And if the game sells as well as I believe it will, shareholders will reap the reward.

• Sony Corporation (NYSE: SNE): Sony owns partial rights to The Beatles’ music catalog. That means every time a Beatles record is purchased, a song is downloaded, or a tune is played on the radio, Sony rings the register. The rights are held by Sony/ATV Publishing, a joint venture between Sony and Michael Jackson’s estate.

Of course, Sony has other businesses, too, aside from waiting for oldies radio stations to play Yellow Submarine…

It makes the ever-popular PlayStation video game consoles, on which users can play “The Beatles: Rock Band” (in addition to Microsoft’s X-Box and Nintendo’s Wii systems). Sony also makes a mass of other electronic equipment and is in the television and movie businesses.

Wall Street isn’t exactly enamored with the company at the moment. There are 12 “Buy” recommendations against 10 “Holds” and one “Sell.”

After a series of missteps, Sony isn’t expected to be profitable this year or next. But it does boast a strong film division and restructuring could result in its weak stock price rebounding.

• Electronic Arts (Nasdaq: ERTS): The company is the publisher of “The Beatles: Rock Band.” Like Viacom and Sony, Wall Street thinks it’s also going to be a Hard Day’s Night for ERTS. There are 14 analysts who believe the stock is a “Buy,” while 15 say, “Hold” and three have a “Sell” verdict.

In the face of stiff competition and few exciting new titles, Electronic Arts is expected to lose 30 cents per share this year. But in 2010, the books are expected to turn into the black, with the company projected to earn 97 cents per share, rising to $1.27 in 2011. In addition, it has over $2 billion in cash and no debt, and enjoyed recent success with its EA Sports Active.

The stock has suffered a beating, but has thus far failed to mount much of a rally, unlike many others who also took a hit in the downturn.

But should “The Beatles” and other games help turn things around, Electronic Arts might wind up being a great contrarian play.

• Gamestop (NYSE: GME): If you have a teenager, chances are they already spend Eight Days A Week browsing and playing games at Gamestop, a leading video game retailer in the United States, Europe, Canada and Australia.

The firm should benefit from increased consumer traffic related to purchases of “The Beatles,” plus a host of other games and accessories that it sells.

In contrast to the other three companies, Gamestop is much more popular, with analysts in giving it 14 “Buy” ratings and just two “Holds.” While earnings growth isn’t exactly stellar – EPS is estimated at $2.40 this year and $2.55 next year – the stock is cheap at 10 times this year’s EPS.

If you want to talk “best of breed” in the video game retailing world, Gamestop is it. Gamers can sell back or trade their games at Gamestop for other titles, which gives the company an advantage over retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY). Plus, in addition to browsing the store, gamers can test-drive the games on the demo consoles and talk with employees, who are usually gaming enthusiasts, too.

Gamestop is gaining market share and is cheap enough to buy at current levels. If the upcoming holiday season is particularly strong, look for it to beat estimates and send share prices higher.

These four stocks have the potential to generate significant gains and put money in our pockets. And I hope we manage to make gobs of it. Just remember, money Can’t Buy Me Love.

Marc Lichtenfeld

Source: A New Wave of ‘Beatle Mania’… Four Ways to Profit from the Beatles: Rock Band

If you need a place to live and want to own a house, why not? Prices in some areas are fairly reasonable. But if you’re speculating, our guess is that you’ll get a better deal if you wait.

Why? For the many reasons we have given you in these Daily Reckonings. House prices may be firming in some areas – that’s what the Case-Shiller numbers seem to show. But nationwide, they are probably headed down for quite a while longer.

Herewith, four reasons why:

First, as you know, this is a depression. It will probably be long. And deep. You wouldn’t know it from looking at the stock market or reading the news. The Dow went up another 114 points yesterday. Oil rose to $71. And the dollar – anticipating inflation – fell to $1.44 per euro.

But that’s what bounces are supposed to look like. They look good enough so that people mistake them for the real thing… and get suckered into more losses.

Depressions drag down asset prices. Typically, prices become much more reasonable. And then they reach UNREASONABLE levels. House prices have become reasonable. Now they will become unreasonably cheap…

Second, waves of resets and foreclosures are still washing over the housing market. As Barry Ritholz told us in Vancouver, we’re only half way through the foreclosure process. There are more than 18 million empty houses in America. A news report yesterday told of a 32-storey apartment building in Florida with only one lonely tenant.

And still coming up are more refinancings… more drowning homeowners … and more people giving up on homeownership altogether. The bubble era created new households at the rate of 1.2 million per year. Practically every one of them wanted to get in on the housing boom. Now, there are only 500,000 new households per year. And few of them still believe that housing is the route to wealth. At the current rate, it will take many years to fill up all America’s empty houses.

Third, incomes are falling. Property crashed because people with average incomes could no longer afford to buy the average house. Now, they can afford even less. Ken Rogoff estimates that the consumer needs 6-8 years to pay his debts down to a more reasonable level. Part of that deleveraging process will mean getting rid of heavy mortgage debt – one way or another.

Fourth, there are too many houses that are too big… and in the wrong places.. Big houses were a status symbol in the bubble years. Now they’re a symbol of extravagance and error. Plus, they’re expensive to own. People will want to dump them – even if they can afford them. There was far too much building in the outlying suburbs of the sand states too – Arizona, Nevada, California and Florida. Those houses may have to be abandoned as people are forced to move closer to where the work is.

There are also a couple of more technical reasons why the Case-Shiller numbers may be erring on the bright side: seasonal adjustments and a changing mix of houses sold. But our guess is that real house prices – adjusted for inflation – will continue going down for many more years.

You want to see deflation? Go to Tokyo City in London. The restaurant chain says it is going to give its food away for free. Customers will pay for drinks plus 2 pounds 50 pence for service.

Meanwhile, in Tokyo itself prices are falling – again. The Japanese have had on-again, off-again deflation for the last 20 years… ever since their stock market crashed in 1989.

Hey, what’s the matter with those Japanese? Don’t they know about stimulus?

Hold on there, pilgrim. What the Japanese don’t know about stimulus ain’t worth knowing. They’ve stimulated their economy so much that their government debt now measures 200% of GDP. And what did they get for all that stimulus? Did it get their economy moving?

Are you kidding? Now, the latest news tells us that they also have the highest jobless rate in 6 years. And the latest figures show the inflation rate NEGATIVE. In fact, never has the inflation rate been lower.

*** Nissan announced an electric car. Shares soared.

*** Jobless benefits are running out for 1.5 million unemployed Americans, says a New York Times report.

*** And here a commentary by David Pauly on what Wall Street is doing about low earnings – lying!

“Stock analysts continue to promote corporate earnings lies, insisting that net income isn’t really what investors need to know… .

“In analyst speak, Intel Corp. (NASDAQ:INTC) wasn’t hit with a $1.45 billion fine from the European Union in the second quarter for anticompetitive practices.

“After setting aside funds to cover the fine, which Intel is appealing, the semiconductor-maker had a quarterly loss of $398 million, or 7 cents a share. Disregarding the fine altogether, analysts maintain the company earned 18 cents a share, beating their average estimate of 8 cents.

“As Wall Street tells it, the employee stock options Google Inc. granted in the second quarter didn’t cost its shareholders $293 million.
“Google (NASDAQ:GOOG), according to generally accepted accounting principles, earned $1.48 billion, or $4.66 a share, in the period. Not enough for Wall Street, which prefers to say the company earned $5.36 a share, leaving out the cost of stock options.

“Viacom Inc. (NYSE:VIA.B), an entertainment company, this week reported second-quarter net income of $277 million, or 46 cents a share. Analysts had estimated profit as if money Viacom paid out in severance in the period wasn’t the real thing. On that basis, Viacom earned 49 cents a share, beating the average estimate by 1 cent.

“Time Warner Inc. (NYSE:TWX), a rival of Viacom for entertainment dollars, said it earned $519 million, or 43 cents a share, in the quarter. Analysts insist Time Warner earned 45 cents, excluding, according to Bloomberg data, costs related to litigation and asset sales. Lawyers must work for nothing.

“By similar Wall Street reckoning, the expense of cutting jobs and selling an asset that reduced McGraw-Hill Cos. (NYSE:MHP) second quarter earnings per share by 10 percent was immaterial.

“Analysts also say investors should ignore $129 million that Textron Inc. (NYSE:TXT), maker of small airplanes, helicopters and golf carts, charged against net income in the latest quarter. Included was the cost of shutting a plant for an eight-seat jet Textron decided not to build.

“General Electric Co. (NYSE:GE), which makes jet engines and electric power equipment and has a financial services arm, had a second- quarter profit of 24 cents a share. GE and the analysts emphasized earnings from continuing operations, which at 26 cents a share, exceeded their estimate by 2 cents. A $194 million loss from discarded businesses was discarded.”

And so on… and so on…

*** “As You Like It” was as we liked it – lively, bawdy, and raucous. It is not Shakespeare’s finest play – or so the critics say. But it has some marvelous dialogue. “All the world is a stage… ” is the most memorable.

Our hostess had set up a stage on the lawn and put out a hundred or so chairs for guests. But by the time we sat down it had begun to rain. The chairs were wet. A Frenchman gallantly wiped off Elizabeth’s chair. Your editor sat down in a puddle… and the play began…

The rain continued throughout the performance. Some spectators – perhaps those who listened to the weather forecast – came equipped with parkas and anoraks. We had an umbrella, which we held over our heads throughout the performance.

Despite the drippy conditions in the bleachers, a good time was had by all. The English actors who performed the play were real pros. They enlivened the set with music and acrobatics, moving the story forward 4 centuries to the days of Peace & Love and strawberry fields forever. We never quite got the connection… but it seemed to work, somehow.

After the play was over, we retired to a stone barn for soup and dessert. There, we met neighbors whom we only see once a year – in August. Among them was a dear Daily Reckoning reader.

“I’m glad I bought gold when I did,” he said. “It was $600 or so at the time. So I made a gain on the gold. But the important thing was that I wasn’t caught in that sell-off in stocks last year.

“What do you think gold is going to do now?”

“Probably, it will go down,” we replied.

“So, you’re selling your gold?”

“No… we’re holding on… It’s too risky to sell it.”

*** “Of course, that’s the big question,” Elizabeth began on the drive home.

“What’s the big question?”

“About whether the world is just a stage. It’s really a question of free will. About whether we do things because we think them through ourselves, or whether we just play our roles.

“I suppose it’s related to the ‘Great Man’ theory of history… the idea that people actually determine history, rather than play their parts in it… ”

“It’s probably like all the great questions… that is, both true and untrue at the same time. I mean, Louis 14th couldn’t have been Louis 14th if there hadn’t been a Louis 13th… and if France hadn’t been the leading country of Europe… and if it hadn’t been the peak of the monarchic age.

“And Rommel couldn’t have led a Blitzkrieg in WWII if the tank hadn’t been invented in WWI… .

“In both cases, it appears that Shakespeare was right… that the roles were already there, just waiting for someone to play them… ”

“Yes, but I wonder if that is true… or as completely true as it looks. The fellow who took over from Lenin didn’t have to be a monster, did he?”

“I don’t know. If he hadn’t been so ruthless some other guy probably would have purged him out… sent him to the gulag. Once a revolution gets started, the most violent and ruthless groups seem to take over. So, I guess you could say that even there… the role must be played… ”

“Does that apply to our personal lives, too? Are we just playing roles? You are pretending to be my husband. I am pretending to be your wife. We are pretending to love each other. Is that all there is to it?”

“No… no… that’s very different… ”

“How so?”

“I don’t know… but when I say I love you, it comes out of my soul like smoke from a sacred volcano… ”

“What does that mean?”

“I don’t know… I just like the sound of it… ”

Source: More Empty Houses in America

The vomit approach continues at the Treasury. This time their throwing up historically low mortgages on the wall… just to see if they stick. The U.S. Treasury is considering a proposal to offer new mortgages at 4.5% through Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). That’s a point and a half lower than the silly “free market” says it should be.

Should this mortgage plan come to pass, we note that the U.S. government would be manipulating prices in almost every major market.

They are now the dominant force in commercial paper. They are propping Libor through the Fed’s multitrillion-dollar lending facilities. And through equity purchases in the TARP, they’ve inflated shares of nearly every bank engaged in the mortgage-backed security trade — the very stocks the market hates the most.

Maybe the Treasury should take a page from Franklin Roosevelt and just announce a closing price for the S&P 500 every day. FDR reportedly fixed the dollar price of gold every morning over breakfast… that is, until he tired of the practice in 1933 and just declared the yellow metal an illicit commodity, illegal for Americans to privately own.

“You can add the bond market to that list,” notes Dan Denning. “The Fed is systematically decimating the yield on U.S. government bonds and notes. It is blitzkrieging its way through the U.S. yield curve, buying, or threatening to buy, U.S. bonds and notes in order to lower rates.

“Don’t believe it? Bloomberg reports that the yield on 90-day Treasuries is 0.01%, while 10-year U.S. notes yield 2.66%. Both yields, as you can see on the chart below from the Dallas Fed, are down.

“By buying up securities with different maturities, the Fed lowers interest rates. Investors crowd in looking for safety and, of course, rising prices. But what is the Fed really up to? Is it really trying drive interest rates on government bonds so low that savers, and, more importantly, banks, begin to loan out some of their excess reserves, or, better yet, use them to buy distressed assets from each other.

“If you want to use a military metaphor, the Fed is dropping big rocks on safe houses from its EZ Money helicopter battleship. One basis point at a time, it is methodically destroying any rational reason for investment advisers to put their clients in Treasuries.

“So if you’re not going to be in ultra-safe Treasuries, because they are really no better than cash, then what will you do with your money? You have to do something with it. You will spend it. Or invest it.”

Thanks to the recent Treasury-assisted plunge in mortgage rates, mortgage applications soared 112% last week compared with the week before. According to the latest from the Mortgage Bankers Association, rates fell to an average 5.4% last week, about 50 bps lower than the week before.

Judging by news emanating from the Treasury, this trend is likely to continue.

Major indexes in the U.S. enjoyed a wild ride Wednesday. Despite all the dire economic data we reported yesterday, the Dow ended up with a nice gain of 172 points, or 2%. The S&P 500 and Nasdaq fared even better, up 2.5% and 3%, respectively.

Indexes were down, with about 1.5% losses, but then turned around after the Fed released its latest “Beige Book.” Traders must have seen something we didn’t… our eyes were drawn to statements like:

• “Overall economic activity weakened across all Federal Reserve districts”
• The manufacturing outlook is pessimistic, as activity “declined noticeably”
• “Retailers were preparing for a relatively slow holiday sales season”
• “District reports generally described labor market conditions as weakening.”

Perhaps this is a sign of a temporary bear market bottom… a Beige Book like this would send stocks to the woodshed in any other market.

Harvard’s endowment fund reported this week it lost 22% from July to end of October. That’s $8 billion down the drain. Only six other colleges in the U.S. have a total endowment greater than Harvard’s recent loss.

Harvard officials say the loss is likely higher, as the totals don’t include “hard-to-value assets” like real estate and private equity deals. The endowment also told The Wall Street Journal they are planning for 30% net losses by June 2009.

AT&T (NYSE:T), DuPont, Viacom (NYSE:VIA.B), Credit Suisse (NYSE:CS), Adobe (NASDAQ:ADBE) and Merck (NYSE:MRK) all announced deep job cuts this morning. Between the six companies, another 28,450 jobs will be shed.

Yet… three out of four men engaged in a friendly game of tennis this morning in Baltimore, Md., believe the “bottom is in” for stocks. Two of the men work for money management firms in town. Another is getting shellacked in the crabbing business. The fourth is an editor and publisher of financial newsletters. Guess who thinks we have another couple legs down?

One of the nation’s leading 401(k) stewards wants you to think the bottom is in, too. We received this nifty graphic from Fidelity this week. The subject line of the message was enthusiastically titled “U.S. Stocks Often Rebound During Recessions”

“Stocks are cheap,” bond king Bill Gross opined in his latest investment outlook, “when valued within the context of a financed-based economy once dominated by leverage, cheap financing and even lower corporate tax rates. That world, however, is in our past, not our future. More regulation, lower leverage, higher taxes and a lack of entrepreneurial testosterone are what we must get used to — that and a government checkbook that allows for healing, but crowds the private sector into an awkward and less-productive corner…

“We are now morphing toward a world where the government fist is being substituted for the invisible hand; where regulation trumps Wild West capitalism; and where corporate profits are no longer a function of leverage, cheap financing and the rather mindless ability to make a deal with other people’s money.”

What’s Gross buying? He’s quite biased in this regard, but we’ll still pass his advice along: “Better to own corporate bonds than corporate stocks.”

The dollar and gold have been relatively quiet over the last 24 hours. The dollar index remains at a lofty score of 79 today, while gold still goes for roughly $770 an ounce.

In the oil patch, light sweet crude remains at $46 a barrel, despite yesterday’s rally in equities.

“The oil company BP (NYSE:BP),” notes Byron King, “has booked the Eagle Vienna, a supertanker capable of storing around 2 million barrels of crude oil.

“BP intends to use the tanker to store North Sea oil at sea and to sail it to an anchorage in the Gulf of Mexico. In other words, BP appears to be wagering that it can get a higher price for oil by holding stocks, rather than selling now.

“BP’s action brings the total volume of booked storage to at least 12 million barrels controlled by oil firms and traders. This is about 15% of one day of world oil demand. By leasing tankers for storage, BP — along with Shell (NYSE:RDS.A / RDS.B) — is betting that the cost of hiring vessels at the current depressed rates will be less than the gains to be had from waiting for an eventual upturn in crude prices.”

“I believe that you are being cavalier,” writes a reader, “and much too harsh on the reader who suggested pegging a federal tax on gasoline to uphold a certain price level. This country does not plan, it only reacts. Look at the green projects canceled or on hold now due to the low price of oil. Even oil exploration and development projects are on hold.

“There is no way to stimulate free market alternative fuels research and production if the market price of gasoline sinks below a certain point. People respond to pain. Fuel economy is the result of pain in the pocketbook; and the capital of entrepreneurs goes where it is appreciated. Did no one learn anything from the ’70s oil crisis?

“I don’t expect that you would remember the 1970s because you probably were still pissing in a diaper at that point.”

The 5: Nice. At least in the ’70s they were still teaching civility to little kids. Although it would appear they must have skipped the generation before us.

“Thank you for your snarky responses,” writes in yet another, “to readers espousing the benefits of taxation and communism in today’s edition. We need to beat the apologists back with a stick and take back capitalism so that this country can truly thrive. Additional taxation and regulation, which is where we are heading, is not the answer. Long live free markets with unfettered risk and reward. And if you know where I can find such an economic utopia, let me know where it is!”

“Your response yesterday to a reader,” says the last, “was right on point — the same point was made many years ago by Einstein — but in a few less words: “The problems we face today cannot be solved by the minds that created them.”

“Reading comments from your readers,” writes another, “makes me wonder what the dissenting subscribers to your great services are looking for. The minute the status quo — increasing returns on the ‘market,’ housing bubble, easy credit, etc. — changes, they cry for more regulation. If I’ve learned anything in damn near 60 years on this orb, it’s the more a thing is regulated, the more it diminishes in functionality.

“In a totally ‘free market,’ if one will ever exist, surely, there will be charlatans, fakers and humbuggers trying to take advantage of the uninformed and witless. Hence, the rub. If we are more informed and keep our wits about us, the riff-raff will be less successful in the efforts to separate us from our hard-earned assets. At the risk of sounding like more esteemed members of your organization, I say, ‘Let the whole thing crash’ The survivors will be stronger and the system of trade, trust and communication that results might actually work, long term.

“Keep preaching the gospel of ‘Agorism.’ There are more of us acting in support of the gospel than you may realize.”

Hallelujah,

Addison Wiggin,
The 5 Min. Forecast

Source: Mortgage Manipulation, Bond Market Truth, Are Stocks Cheap? and More!